Business and management

French telecoms wars

Not over yet

NO-ONE could accuse Arnaud Montebourg of being a good loser. The French industry minister had made it clear since March 5th that in the battle between two bidders for SFR, France’s second-biggest telecoms operator, he considered Bouygues Telecom, its third-biggest, the right choice. Their fusion would remove one player from France’s intensely competitive telecoms sector and allow the remaining firms to build margins and invest.

But Vivendi, SFR’s parent, thought otherwise. On March 14th it said it would negotiate only with rival bidder Numericable, France’s largest cable operator. Merging the two would not immediately stop the price wars in telecoms, but by bringing together complementary rather than competing businesses might well encounter less resistance from competition authorities and result in fewer firings. Did Mr Montebourg bow out, leaving the private sector to make its own decisions? Not so you’d notice it

The Numericable bid presents numerous problems, Mr Montebourg said on French radio on March 14th, not least for the taxman. Though Numericable itself is a French firm and listed on the Paris stock exchange, its parent company, Altice, is registered in Luxembourg and listed in Amsterdam. Patrick Drahi, the founder and chairman of Altice and the driving force behind Numericable (pictured), controls his share of Altice through a holding company in Guernsey, a British tax haven. Mr Drahi himself has both Israeli and French citizenship and is a Swiss resident. “Mr Drahi will have to repatriate the bulk of his belongings and goods to Paris, in France,” Mr Montebourg thundered. “We are going to have some fiscal questions to ask him.”

Fleur Pellerin, the minister for the digital economy, who is often to be seen at Mr Montebourg’s side on public occasions, takes a more nuanced view. “I’m not a tax inspector,” she said when asked by the Journal de Dimanche, a weekly, whether Mr Drahi’s Swiss residence was a problem for his bid. “But if Patrick Drahi becomes the second biggest telecoms operator in France,” she added, “it would be logical that he should repatriate his fiscal residence to France and manage his affairs from Paris.” Did Mr Montebourg go too far in taking a public stance on the merits of the two bids? “Sometimes,” she says, “it is necessary for the government to express its views if it is a question of solutions that would be dangerous for the French. That is not the case here.”

Mr Drahi himself has no intention of moving his tax residence from Switzerland, he told a press conference on March 17th. "I am already going to invest €3 billion in France, which is a massive repatriation. If all the investors who invest in France repatriated all their money to France, I would do the same tomorrow morning,” he said. He did not mention, but might have done, that among the hordes of even patriotic Frenchmen who keep their financial assets in low-tax Switzerland rather than high-tax France is or was Jérôme Cahuzac, a former budget minister, who resigned under a cloud in May 2013 when this fact became known.

Mr Montebourg vows that he has not finished fighting. He seems to have allies. Jean-Pierre Jouyet, the chief executive of a public-sector investment body, said in an interview today with Les Echos, a financial daily, that his Caisse des Dépôts et Consignations would be prepared to invest in a Bouygues-SFR merger to help the sector restructure. Bouygues itself says it still intends to be a big player. Martin Bouygues, boss of the diversified group that owns Bouygues Telecom, saw the finance minister, Pierre Moscovici, this morning. There are rumours of rapprochement with Iliad Group’s Free, the disruptive firm whose eruption into mobile telephony in 2012 with rock-bottom prices precipitated the intense competition that has weakened its rivals since then. All in all, it was a good opening for what is likely to be another week of cut-and-thrust in French telecoms.